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How Much Money Should You Keep In The Bank?
This is probably a big question for many. How much money should you actually keep in the bank?
Rather from this perspective, let's look at this question from another perspective. What benefits would you get from keeping money in a bank savings account?
Let's start with savings account with the most commonly used banks.
POSB Savings Account
S$ Deposit - Deposit Accounts
*The above diagram is taken from POSB.
From the above diagram, if you currently hold S$10,000 in your savings account, you will get an annual interest rate of 0.05% . Which translates to $5 return in a year for S$10,000 in the bank.
If you were to be able to hit the S$100,000 threshold, you will only still get $50 for that S$100,000 you kept with the bank.
OCBC Savings Account
For OCBC bank, there are 2 plans to work out the return rates. The first plan is called Bonus + Savings Account. On paper, it looks attractive, yet if we were to work out the math it would say otherwise.
Of course, you first have to place at least $10,000 fresh funds which are funds not transferred or withdrawn from existing OCBC Bank deposit accounts and re-deposited or funds in the form of OCBC Bank cheque/cashier's order /demand drafts.
Now here comes the mentally draining part. Although it offers a range of interest rates, from 0.05% to 2.35% per annum. Yet, there is a catch, the first 0.05% p.a.monthly base rate is fixed. The next 0.55% is only given to you if you do not withdraw your money for the entire month.
This occurs for the first 2 months in the quarter. The third month you will gain an additional 0.55% p.a. interest when you do not withdraw during that calendar quarter. You also will only gain the remaining 1.2% p.a. when you top up fresh funds of $10,000 and make no withdrawals within that calendar quarter.
Therefore, this is how the interest rate are calculated for OCBC Bonus + Savings Account.
The other savings plan for OCBC Bank would be your typical monthly savings account plan. For this plan, you don't have to place in initial deposit but you would have to deposit a minimum of $50/month.
For this plan, the potential interest rate you can earn is up to 0.40% p.a. However, the plan works with the standard base interest of 0.05% p.a.and you would only receive the additional 0.35% p.a. interest rate if you deposit at least $50/month and make no withdrawal within the month.
Truth be told, it is sad that banks only offer a basic 0.05% interest rate p.a. without a catch. Any higher than this would definitely come with this downside.
Liquid assets are usually categorize into the following : Liquid and Non-Liquid assets.
Cash are usually liquid assets due to the fact that it can be readily assessed. Investments are also considered liquid assets because they can be readily converted into cash. For example, stocks, bonds and mutual funds are all liquid assets.
Estate investment are usually considered non-liquid assets because it can take months for a person or company to receive cash from the sale.
Still, these are all based on my personal opinion. At the end of the day it still depends on your personal preference be it keeping the money in the bank or using it for liquid assets. However, one thing is for sure, it's always best to act fast before it's too late.
This article is contributed by Adam Loke.
Let's start with savings account with the most commonly used banks.
POSB Savings Account
S$ Deposit - Deposit Accounts
| POSB PASSBOOK / SAVE-AS-YOU-EARN / EVERYDAY SAVINGS / POSBKIDS / WORK PERMIT / POSB PAYROLL / SAVINGS - AF | |
|---|---|
| First $10,000 | 0.0500 |
| Next $90,000 | 0.0500 |
| Next $250,000 | 0.0500 |
| Next $650,000 | 0.0750 |
| Remaining balance above $1,000,000 | 0.1000 |
*The above diagram is taken from POSB.
From the above diagram, if you currently hold S$10,000 in your savings account, you will get an annual interest rate of 0.05% . Which translates to $5 return in a year for S$10,000 in the bank.
If you were to be able to hit the S$100,000 threshold, you will only still get $50 for that S$100,000 you kept with the bank.
OCBC Savings Account
For OCBC bank, there are 2 plans to work out the return rates. The first plan is called Bonus + Savings Account. On paper, it looks attractive, yet if we were to work out the math it would say otherwise.
Of course, you first have to place at least $10,000 fresh funds which are funds not transferred or withdrawn from existing OCBC Bank deposit accounts and re-deposited or funds in the form of OCBC Bank cheque/cashier's order /demand drafts.
Now here comes the mentally draining part. Although it offers a range of interest rates, from 0.05% to 2.35% per annum. Yet, there is a catch, the first 0.05% p.a.monthly base rate is fixed. The next 0.55% is only given to you if you do not withdraw your money for the entire month.
This occurs for the first 2 months in the quarter. The third month you will gain an additional 0.55% p.a. interest when you do not withdraw during that calendar quarter. You also will only gain the remaining 1.2% p.a. when you top up fresh funds of $10,000 and make no withdrawals within that calendar quarter.
Therefore, this is how the interest rate are calculated for OCBC Bonus + Savings Account.
The other savings plan for OCBC Bank would be your typical monthly savings account plan. For this plan, you don't have to place in initial deposit but you would have to deposit a minimum of $50/month.
For this plan, the potential interest rate you can earn is up to 0.40% p.a. However, the plan works with the standard base interest of 0.05% p.a.and you would only receive the additional 0.35% p.a. interest rate if you deposit at least $50/month and make no withdrawal within the month.
Truth be told, it is sad that banks only offer a basic 0.05% interest rate p.a. without a catch. Any higher than this would definitely come with this downside.
So How Much Should I Keep In The Bank?
Back to the purpose of this article, so how much should I keep in the bank? Well, based on my personal opinion. I feel that bank account should only consist of money that you need for your monthly expenses and also emergency funds. Which should consist about 80% of your monthly income, the other 20% should be used to purchase liquid assets.
What exactly is a liquid asset? It's basically cash on hand or an asset that can be readily converted to cash.
Liquid assets are usually categorize into the following : Liquid and Non-Liquid assets.
Cash are usually liquid assets due to the fact that it can be readily assessed. Investments are also considered liquid assets because they can be readily converted into cash. For example, stocks, bonds and mutual funds are all liquid assets.
Estate investment are usually considered non-liquid assets because it can take months for a person or company to receive cash from the sale.
Still, these are all based on my personal opinion. At the end of the day it still depends on your personal preference be it keeping the money in the bank or using it for liquid assets. However, one thing is for sure, it's always best to act fast before it's too late.
This article is contributed by Adam Loke.
Hello! My team and I would like to share and discuss topics on financial planning especially on the topic of necessity, and how financial planning interlinks with our daily hectic lives in Singapore! Feel free to ask us any questions and we will do our best to answer any of your queries!
